No, if there is no route to the interface in the update-source command it won’t peer.
If you still want to have working peering, seems you need:
1
Create basic ip-connectivity between ip-addresses of bgp peers. I mean ip-addresses between that bgp session has to be establish.
on r1
set protocols static route 10.254.18.1 next-hop 10.10.18.1
on r18
set protocols static route 10.254.1.1 next-hop 10.10.18.2
verify ip-connectivity between loopback by pings between their ip-addresses
Other steps make no sense while you have not basic ip-connectivity between bgp-peers ip-addresses.
2
change peer`s ip-addresses in config for Loopback peering
on r1:
delete protocols bgp 65001 neighbor 10.10.18.1
commit
set protocols bgp 65001 neighbor 10.254.18.1 remote-as '65018'
set protocols bgp 65001 neighbor 10.254.18.1 update-source 'lo'
set protocols bgp 65001 neighbor 10.254.18.1 ebgp-multihop 2
on r18:
delete protocols bgp 65001 neighbor 10.10.18.2
commit
set protocols bgp 65001 neighbor 10.254.1.1 remote-as '65001'
set protocols bgp 65001 neighbor 10.254.1.1 update-source 'lo'
set protocols bgp 65001 neighbor 10.254.1.1 ebgp-multihop 2
I expect it to work